Why Legalizing Marijuana Is Unlikely to Bring in Much in Excise Taxes,

from Jacob Sullum (Hit & Run). I don't know much about drug policy (which is why I blog so rarely about it), but this seemed like a particularly thoughtful and level-headed post. There are plenty of arguments -- including fiscal arguments -- for legalizing marijuana, but the excise tax argument does indeed seem relatively weak.

The very idea of legalizing marijuana, just to gain more government money in taxes always seemed to be antithetical to all of my small government instincts, even assuming that it was profitable. We stop funding the war on drugs and start a tax on drugs, which will then fund other (or possibly more) government programs. That this argument even has traction astounds me.

That the argument from individual rights has NO traction is what's astounding. The excise tax argument is a substitute for it, and a poor one at that.

But then again, who can blame them, given the legal doctrines that have hollowed that principle out of the national jurisprudence over the years. IANAL so I'm not up to the specific names, but I remember one called the "Smith doctrine" getting mention here somewhere.

I think that's the one that moots the Ninth Amendment, which I see as a "catch-all" clause intended to forestall the idea that unenumerated rights, aren't.

I don't think the primary reason to legalize marijuana is "just to gain more government money in taxes." As Anon pointed out, ONE reason to legalize is to stop wasting taxpayer money. However, if you're really that concerned about having drug education or other beneficial government programs, the other option is decriminalization. Simply remove all prohibitions and regulations on the cultivation, sale and use of marijuana. Personally, I think some regulations are needed, mostly to prevent a new Big Tobacco type industry from developing. Allow growing for personal use and possibly very small scale commercial sale (pretty much the Dutch model). Put common sense restrictions on use by minors, operation of motor vehicles, etc. You'll alleviate countless political/social/economic problems while increasing personal freedom. And besides, when's the last time anybody was murdered by a pot smoker?

I am surprised that Prof. Volokh missed the most obvious flaw in Sullum's argument-- that the number of "pot smokers" would not increase if it became legal.

If you are pulled over, caught with, or involved with more than a trivial amount of marijuana-- you could go to jail. I mean we aren't talking about real large quantities to damage reputation, chances of future employment, etc... Still, 15 million use it every month?

What would that number be if it were legal to possess or smoke marijuana? I don't know, and Sullum doesn't bother to address it. Without addressing the demand for a legalized crop it seems premature to call any benefit trivial.

One issue associated with legalizing marijuana -- there should be ancillary legislation permitting discrimination based on past and current drug use. Just because it'd be legal shouldn't mean employers should have to accept it. The obvious employers are in the security business (both private and public) and also factories etc.

I suspect that the numbers of pot users would indeed rise- if 15 million use it now, how many more would if it were legal?

However, I would argue that the ease which it can be obtained now means that most of the potential market is already using it! There can't be that many people interested in the drug that are not already users.

Given much lower prices and removal of the legal barriers to obtaining marijuana, consumption almost certainly would rise, as new consumers entered the market and current consumers smoked more often. But it's doubtful that consumption would rise enough for marijuana to generate anything like the excise tax revenue from cigarettes, mainly because, given the differences in the two drugs' effects, pot smokers (as a group) are never going to smoke as heavily as cigarette smokers. With a tax rate comparable to the U.S. average for cigarettes, we might be talking about hundreds of millions of dollars a year, or maybe a billion or two, as opposed to $15 billion.

I suspect that there are real differences that would make generating revenue from a excise tax on marihuana rather doubtful:

Tobacco, from what I understand, requiring aging and other processes, and turning it into a cigar or cigarette (or grinding and mixing the right mix for a piple) is difficult to inconvenient. Smokers are thus dependent on an industry whose operations can easily be monitored and measured and taxed. Pot, on the other hand, is known as "weed" for a reason. It'll grow just about anywhere, and is smoked as-is. I doubt an excise tax on tobacco would be feasible if any smoker could plant seeds in the back yard and roll his own. The only way to enforce the tax would be ... a war on (untaxed) drugs.

I'd suppose the average user might be willing to pay some modest premium in exchange for, oh, some guarantee of quality or things like that, but I also doubt he/she would be willing to pay a very high one, when they could as easily put a few marihuana seeds in with the petunias.

What would that number be if it were legal to possess or smoke marijuana?

Who cares? Pot is fairly harmless drug, proven to be non-addictive, and actually helpful for medical reasons, not the least of which includes reducing stress, a major problem in our society. When ibuprofen became an OTC drug, did people fret about whether the number of users would rise? It did, and everyone is happy.

People who are concerned about the rise in users of pot are making assumptions that pot is a bad drug. If it is, than make the argument. Otherwise, find something else to worry about.

The very idea of legalizing marijuana, just to gain more government money in taxes always seemed to be antithetical to all of my small government instincts, even assuming that it was profitable. We stop funding the war on drugs and start a tax on drugs, which will then fund other (or possibly more) government programs.

A tax on vice is very much like a mild criminal penalty, with the advantages being the uncertainty has been removed (you know you will pay the penalty and you know exactly what the penalty is) and there will be no criminal record. Given the choice, I'll take the sin tax over the sin prosecution any day.

Furthermore, as to the government program angle, it is much preferable for the government to take a tax from me and then provide some service of even questionable value to others, rather than to tax everyone else in order to punish me.

Personally, I think some regulations are needed, mostly to prevent a new Big Tobacco type industry from developing.

What would be wrong with that?

One issue associated with legalizing marijuana -- there should be ancillary legislation permitting discrimination based on past and current drug use.

Employers can already fire you just for being a tobacco smoker, even if you only smoke off the job. There is no need for extra legislation to give them that right.

With a tax rate comparable to the U.S. average for cigarettes,...

That's the wrong comparison. Marijuana is an intoxicant, so alcohol would be a better comparison.

I doubt an excise tax on tobacco would be feasible if any smoker could plant seeds in the back yard and roll his own.

The are other advantages to a commercially available product, beyond the "guarantee of quality" that you mentioned. Convenience is one. After all, it's not that hard to make wine, but most people just buy it and pay the tax.

I always find it funny when everyone treats a couple hundred million dollars a year like it's no big deal. Hell, if you feel that way, send it MY way.

But really, how much body armor do you think a couple hundred million could buy? Or hey, maybe we could buy some people some health insurance. At $400 a year, we could afford 500,000 people. Or whatever.

If this country can't figure out how to use a couple hundred million dollars, I think every Congressperson needs to go back to remedial math.

Keep in mind that marijuana is presently supplied by people who don't mind breaking the law: it may simply be more profitable for them to continue to operate illegally than to pay the costs incurred by competition and taxation. Legal competitors could easily be discouraged by a little violence (it's already a violent business).

Quite. Other than perhaps a few attorneys and law enforcement types, do you really think there are people who don't smoke b/c it's illegal? I don't. For anecdotal proof, how many teenagers did you know who refused to drink until their 21st birthday?

Perhaps legalizing or de-criminalizing marijuana will demonstrate we can lose the War on Drugs and profit by it in many ways. Legal tobacco and alcohol use apparently are so ingrained in society that people consider them different than "controlled substances".

Drop the fixation on vice taxes for a sec. Instead, look at the wealth currently foregone by pot consumers. This is upward of $60B/yr (according to the article) in funds that could be invested, spent on retail, or saved, rather than dropped into the mega-albatross of the black market.

That would be a huge positive shock to the system, and IMO should be up there in importance with the economic and social savings from the foregone WOD, and way ahead of the vice tax issue.

Also, forgotten in this analysis, is the lost income tax that results from criminalizing marijuana. If we could tax the income of marijuana distributors, tax the sales of marijuana, and tax the excess sales that occur because people have more money to spend on things other than marijuana, I think the increase in tax revenue would be quite substantial, regardless of an excise tax (not that a few hundred million is insubstantial. Combined with the money we could save by not fighting marijuana, this would be quite a revenue coup for the government.

I do not use marijuana. I would certainly use marijuana -- probably about as much I use alcohol now -- if it were legal.

I have a garden. I grow Concord grapes, but I haven't had enough yet to make wine. (I've got enough raspberries to eat all summer; my brother somehow gets enough to boil into a few pounds of jam.) I get enough tomatoes, but the corn and pumpkin have been disappointing. If marijuana were as easy as raspberries I might grow my own, but if it were as hard as corn I wouldn't. (I tried to grow Connecticut valley tobacco, something I wanted to do every since I saw Sommersby, without success.)

Keep in mind that marijuana is presently supplied by people who don't mind breaking the law: it may simply be more profitable for them to continue to operate illegally than to pay the costs incurred by competition and taxation. Legal competitors could easily be discouraged by a little violence (it's already a violent business).

That only works in outlaw businesses. That's why they don't take over legitimate industries (money laundering, or corrupt industries, don't count.) The "Wierd News" columns are regularly full of "stupid criminals" who complain to the cops that their drugs were stolen and so forth, like here or here.

Drop the fixation on vice taxes for a sec. Instead, look at the wealth currently foregone by pot consumers. This is upward of $60B/yr (according to the article) in funds that could be invested, spent on retail, or saved, rather than dropped into the mega-albatross of the black market.

That $60 billion isn't being tossed into the bushes; it's being used to pay marijuana producers and suppliers, all of whom have to eat, pay rent, and buy their kids Christmas presents. Marijuana has a high price because it's illegal. But every dollar lost by consumers is a dollar gained by producers. High pot prices aren't different from the prices of any other goods: bad for consumers, but great for producers. Low prices are great for consumers but bad for producers.

All that money already is already being "invested, spend on retail, or saved" ...by pot producers and retailers. There's no macroeconomic difference between a buyer being able to purchase a plasma TV because his pot is cheap and a seller being able to purchase the same TV because pot is expensive.

Oh boy there are a lot of posts here and very few potheads! You guys got a few of the facts dead wrong. Start from the beginning

If you are pulled over, caught with, or involved with more than a trivial amount of marijuana-- you could go to jail.

You call this a law blog?! Marijuana in the trunk of a car (driven by a sober, licensed, insured individual) is virtually seizure-proof unless the police can get a dog there before the detention becomes unreasonably long (and dogs are $$$). Similarly, smoking dope in your own bedroom is unlikely to draw a search warrant for your house. Drug dealers and users are surprisingly well versed in civil rights laws (and hella pissed about Illinois v. Caballes, but that's neither here nor there).

Pot, on the other hand, is known as "weed" for a reason. It'll grow just about anywhere, and is smoked as-is.

This sentence clearly dates you about 30 years (sorry). Since the advent of the war on drugs there has been a clear incentive for marijuana growers to maximize potency since smuggling is a per-unit expense and marijuana is considerably bulkier then, say, cocaine. As a consequence, most users now smoke the "good stuff" which was bred for indoor cultivation - artificial lighting (100W/plant), chemical fertilizer and constant attention to screen out male plants (lest they fertilize the smokable flowers into unsmokable seeds). There are a few outdoor enthusiasts that breed for that market but criminalization makes them few and far between.

Also (and this is a quibble) any plant must be cured before it can be smoked (think water content) although marijuana curing is quite a bit simpler than tobacco.

As far as the number of smokers, I don't know where 15 million comes from but consider that some studies have put it at more than 25 million*. Furthermore, there are plenty of states for which marijuana is decriminalized. In California, possession of less than an ounce (which, if it's the potent variety, is equivalent to at least 60 medium doses) is a no-jail-time, $500 max fine offense. Studies have indicated that there was no appreciable increase in drug use concurrent with changing the law**.

Now, if we talk about full-blown legalization, there would of course be a short-term increase in the number of smokers as curious middle-aged folk that are currently are "out of the loop" experiment with it. This is a question for which there is no good empirical evidence so I'm not going to speculate (also, not my generation).

Other than perhaps a few attorneys and law enforcement types, do you really think there are people who don't smoke b/c it's illegal?

I know my lawyer does!

*U.S. Department of Health and Human Services, Substance Abuse and Mental Health Services Administration, Office of Applied Studies. 2004. National Survey on Drug Use and Health.

**Rosalie Pacula, Jamie Chriqui, and Janna King (2003). Marijuana Decriminalization: What Does It Mean in the United States? Working Paper 9690. Washington, DC: National Bureau of Economic Research

"Keep in mind that marijuana is presently supplied by people who don't mind breaking the law: it may simply be more profitable for them to continue to operate illegally than to pay the costs incurred by competition and taxation. Legal competitors could easily be discouraged by a little violence (it's already a violent business).

If that's so, there might be very little tax yield."

That is exactly what happened when alcohol prohibition was repealed. You are a genius.

A large part of that $60 billion (or whatever Americans spend on pot) goes out of the USA to third-worlders - a tiny part to pay the foreign growers, and a large part to the gangs that collect the crops and smuggle them into the USA.

AK: You raise a good point, but operating illegally is a big economic drag. Much overhead goes to concealment, security, protection, attorneys, etc. And having dirty money does not lend itself to sound investment, hiring employees, etc. Some portion of that goes to "normal" discretionary spending and paying the bills, etc., but will generally be far less productive.

And then there is income taxation, of course.

Lurker: I'll chime in regarding quality, and also agree that 25M people is a more likely number of smokers.

In terms of the marketing structure, pot is more like wine than tobacco (which the Reason article used as a market comparison) - absent gov't-controlled monopolies, there will be a solid middle of very good stuff, with cheap stuff and marginally better high-grade at the high end. That diversity will produce more revenue than the article projects, but pot will never make any one producer as much as Anheiser-Busch or the makers of Marlboros. However, there will be a more diverse market for varying strains, grades, paraphernalia, genetics, and growing equipment for private growers. No, we don't grow it in ditches anymore, but it's well within the reach of an enthuisiast.

In short, there will be wealth creation. The gov't's problem is that that wealth will be deconcentrated compared to the current behemoths hawking intoxicants in this country.

A large part of that $60 billion (or whatever Americans spend on pot) goes out of the USA to third-worlders - a tiny part to pay the foreign growers, and a large part to the gangs that collect the crops and smuggle them into the USA.

Most of the pot sold in the US is grown in Canada. Hardly third-world!

I'm new to the site and am a big fan. The libertarian ideology fascinates me. I just want to ask a general question: no self-respecting libertarian actually supports the war on marijuana, right? If I'm wrong, please explain. Thanks.

People DO still get arrested for possesion of Marajuana. A friend of mine was just arrested for possession of parephenalia (in indiana) and his cell mate got arrested when someone down the hall through a party and the drug dog alerted at his door. So he WAS just smoking in his bedroom, and he's spent 2 months in jail to date.

How much would the savings to the US government be in terms of housing inmates and policing for marajuana? Also, they could require that producers of marajuana as well as marajuana smoking paraphenalia (without which I'm sure the glass blowing industry would be hurting)contribute to educational programs.

They could put excize taxes not only on the pot but on the means one might purchase to smoke it. (But then "pot leads to carpetry")

Those that do get it thrown out on 4th amendment grounds most of the time.

You don't know what you're talking about.

As far as the drug dog, it was on the premises legally (busting a noise disturbance), when it alerted. That alert gave rise to reasonable susipicion of illegal activity, upon which they probably knocked on his door and either saw the stuff, saw an obviously baked individual, or got some kind of consent to enter. That's how it happens, and the process for people getting busted with the stuff in their trunk is similar.

That alert gave rise to reasonable susipicion of illegal activity, upon which they probably knocked on his door and either saw the stuff, saw an obviously baked individual, or got some kind of consent to enter. That's how it happens, and the process for people getting busted with the stuff in their trunk is similar.

This is probably OT but what the hell. Assuming that the police had PC for a knock-and-talk at the door, I fail to see how it gets escalated into entry to the premises without consent (and if he did consent, then there's nothing more to be said). I know this because I have avoided a similar fate myself a number of times. Cops come to the door, you open it a crack, slip out and close the door behind you. You can be high as all hell (and I have been) and so long as you have enough sense to refuse to answer any questions or give consent to enter they're SOL. If I had a nickel for every time I've said the phrase "I respectfully decline to answer that question" to a cop at my door, while high on drugs, I would have at least $5. Seriously, I've had it go back and forth for at least 20 questions on one occasion.

Some people have made halfbaked claims about pot tax revenue balancing the budget - hence the reason column, which is thoughtful but I think wrong. I think pot taxes could generate about as much revenue as tobacco taxes or boose taxes or both. The amount varies with the way the program is structured, and there's a sort of laffer curve where if the tax is too high it becomes selfdefeating, as canada found out with tobacco taxes.
Not discussed yet is the possible impact on income taxes. In the Oddesy, Homer described the lotus eaters. They just sit around eating opium instead of doing other things.
Pot might be similar - people find their wants can satisfied withy food shelter and dope, and be less willing to take second jobs, go to grad school etc. There's a libertarian-conservative-fusion argument there, not one I share. I'm a pothead, off and on. This is an off month, ironically while I'm on Maui.
Another fusion argument is that drugs, including pot, saps the will and lead to loss of personal autonomy, so the war on drugs is a war for freedom. There's -something- to this. I find the best way to avoid pot use is to stay away from it. That could get harder in a world of Archer-Daniels-Midland pot marketing with vending machines on every corner. Still, most adult americans have tried pot and either don't use it or use it moderately and socially.
Overall, as a person somewhat disabled by depression, I find moderate pot use lowers my risks of suicide, heavy drinking, high-risk sex, high-risk driving, etc, but also carries a risk of immoderate pot use, which in the current climate has economic and legal risks and costs, as well as medical concerns.
I don't use tobacco, but I might be interested in learning to grow it for gifts for friends who smoke. I currently garden as a hobby. Is there a good how to online? Where does one get seeds?

OK, so I'll assume that the answer to my prior question is no, no self-respecting libertarian can justify the war on marijuana, which is really what the war on drugs is all about.

I go to liberal sites, and not one defender or marijuana prohibition. I read right wing stuff, and again, no defenses. So, if so many people from across the political spectrum oppose prohibition, why the fuck does the war continue? If that's not a sign that a few powerful interests can thwart the will of millions, then I don't know what is. Oh, and the corporate media never fails to cheerlead for this unconscionable policy.

I agree with the posters who claim that the excise tax is not where the money is - whatever money gained from the tax would be nice - - but its the cost of prosecution, jail, etc... that would end up saving the most money. Coincidentally, this is one of the reasons why it is still illegal. An agent or officer (or department head) whose job and salary depends on illegality will find no amount of evidence or argument persuasive that a susbtance should be made legal.

For those who claim marijuana is no longer targeted for prosecution - i refer you to following stats:

786,545 persons arrested for marijuana violations in 2005, according to the Federal Bureau of Investigation's annual Uniform Crime Report. The total is the highest ever recorded by the FBI, and comprised 42.6 percent of all drug arrests in the United States. Of those arrests, approximately 88 percent (some 696,074) Americans were charged with possession only.

How much money wasted on arresting, jailing, providing public defender, diversion programs, drug testing, probation officers, prison guards, lost jobs, etc..etc... do you think is envisioned in these numbers?
Unless marijuana offenses are targeted more often by the cops - the number of users must be growing exponetionally if roughly the same percentage of total users actually get caught year in year out. Look at 1990 compared to 2005. PROHIBITION IS A JOKE . Billions of dollars may not come from the tax - but tens of billionswould be saved EVERY YEAR if the government found something better to do with its law enforcement time.

Adeez, you need to understand that the people talking here, and on most sites are generally exceptional individuals, at least in the sense that they have opinions which are those of a certain section of the populace. There's a spectrum of belief, but for the most part, it's not entirely mainstream or complete.

To get other parts of the argument, try some religious boards, or some of the other conservative sites. Also, remember that while a large percentage of the populace has tried pot, most people, at this point don't use it. I don't agree with them (who vote against legalizing), but they do generally win.

The current value of the crop is based on the market clearing price. Tax maximizing beaurucrats could hold the price high with taxes and limit access to suppliers. This would allow all the other beaurucrats who enforce marijuana laws to keep on doing the same thing while the government reaps the increased taxes base on current pirce. Smugglers woud undercut the high price to the benefit of consumers and the detriment of the treasury. Market equilibrium is in sight.

Anon Y. Mous: You wrote, "Employers can already fire you just for being a tobacco smoker, even if you only smoke off the job." That's not quite true -- several states have bans on discrimination based on off-duty use of legal products.

Anon Y. Mous: You ask what would be wrong with a Big Tobacco type industry for marijuana.

The problem is that one of the possible perverse effects of corporate capitalism is the encouragement of undesirable behavior. Big Tobacco actively encourages people (including children) to smoke more. The same is true for the alcohol industry. Advertising is the main culprit. If we admit that marijuana abuse can have negative effects, it is valid to try and limit forces that encourage such abuse. Given the ease of growing, large scale industrial production of marijuana is not necessary. I'm all in favor of legalization/decriminalization, but it wouldn't be a tragedy if there were no prepackaged joints available in the local convenience store.

Lurkerguy: I dont know what your post is trying to suggest, but it would seem that it something along the lines of criminal lawyers rely on the drug war for business - as many cops do - and cops could find something else to do with their time if it were to end whereas criminal lawyers would not.

I wont go into the obvious response - that if cops found some other area of crime to pursue- there would still be clients (defendants) for the lawyers - but it strikes me as odd that you would imply that criminal lawyers have some vested interest in the drug war. On the contrary, my experience has repeatedly showed me that criminal lawyers ARE THE MOST VOCAL opponets of the drug war, which to you is apparantly counterintuitive. Perhaps the idea that a criminal lawyer sees the utter stupidity and failure of the drug war, see its effect on families,etc..day in day out - that they have a better perspective than you do. Show me one association of criminal defense lawyers (NACDL, Association of public defenders, etc..) that lobbies for increased sentencs for drug crimes, more drug crimes, more mandatory minumums and i will retract all i say. ON the other hand, try to find a prison guard association, etc...who DOES NOT LOBBY for more drug crimes, longer sentences, etc... and then lets talk about who has a vested interest in keeping things status quo.

I don't use marijuana, but making it legal to use would be a wise idea. Instead of cops aresting/charging people for the posession of marijuana, they would be aresting/charging other people who DESERVE to be. I don't see why marijuana is still illegal, it's just as bad as tobacco and alcohol. They made tobacco legal, so I'm pretty sure, sometime within 5 years or so marijuana will be legal. The government could tax them for buying it instead of taxing others for their crimes.

The reason why we still have this insane war on pot even though so many people are against it, and for legalization, is that politicians are cowards, plain and simple. There is no strong pro-pot lobby, and there is heavy inertia towards the status quo. Imagine any politician advocating for legalization!

Recall that Clinton was careful to say he once tried pot but didn't inhale (which was quite ludicrous) but even he could never admit that he tried it. I recall someone in favor of legalization on the O'Reilly FActor, and O'Reilly tried his best to rip the guy apart. Fox News would be totally against it, plus all those religious wingnuts like Focus on the Family and Concerned Women of America.

If you were a politician, you wouldn't gain many votes, but you sure would be punished nonetheless. So why bother doing the right thing?

They made tobacco legal, so I'm pretty sure, sometime within 5 years or so marijuana will be legal.

Might want to remember that tobacco's getting illegal, again. It's supertaxed everywhere and the laws are getting so that the only legal place to smoke up is at home. One way or the other, marijuana will be as legal as tobacco.